Phenomenal rise in exports and the path ahead for India
For the first time, India will likely clock out the current fiscal with $410 billion worth merchandise exports, translating to a phenomenal 41% increase over the previous year. What quickens the pulse is that unlike GDP growth, exports performance isn’t due to a low base effect as they were north of the pre-pandemic level in FY21 itself. Which is why Commerce Minister Piyush Goyal called the achievement a ‘Made in India blockbuster’. Another notable element was the much-needed export basket diversification. In FY22, India began to shed its image as a primary commodities’ exporter, moving up the chain exporting high-value and finished goods. Provided we sustain and improve the prevailing daily average of $1 billion worth exports, the $1 trillion exports target by 2030 is doable.
Multiple factors helped achieve the surge. The rise in pent-up demand, boost in domestic manufacturing led by production-linked incentive schemes and interim trade pacts came in handy. The government’s eagle eye facilitated ties among states and districts; its engagement with all stakeholders and a detailed strategy, including country and product-wise targets, helped. But above all, high commodity and crude oil prices did the essential heavy lifting. For instance, while the impact of rising crude oil prices on processed petroleum—India’s single largest export item—was evident, high prices of raw materials like steel, chemicals and plastics bumped up the overall figure. Besides, rising food security concerns in the Middle East, North Africa and others aided agri exports to their highest-ever growth yet.
But the downside is that imports too rose by a troublesome 59% so far this fiscal and will likely widen the FY22 current account deficit. Moreover, trade bodies have already warned that exports growth will likely slow down to 15–17.5% in FY23, citing new Covid infections and supply-side challenges. While recent moves like RCEP boost intra-regional trade, it’s essential to diversify geographically. Like the pact with Mauritius, our first-ever trade agreement with an African economy, we must foster more bilateral trade and enhance market access to survive the incoming era of regionalism.